How Do I Buy and Sell Mutual Funds Within 30 Days?

Mutual funds are one of several investment platforms in use today which provide both casual and professional investors with a powerful wealth-generation tool.

Mutual funds are one of several investment platforms in use today which provide both casual and professional investors with a powerful wealth-generation tool. As with most investment tools, however, certain restrictions and guidelines are attached to mutual fund trading which helps ensure a controlled degree of volatility.

Generally speaking, mutual funds discourage buying and selling shares in the fund within a 30-day window. This process, often referred to as round-trip trading, is not expressly prohibited, per se, although fund managers will do their best to keep such activity to a minimum. That being said, if you decide to engage in short-term mutual fund trading, you can do so using a few relatively straightforward strategies.


Although round-trip trading is discouraged in the world of mutual funds, you can still engage in this type of activity using the services of a brokerage firm. Keep in mind, however, that various fees may be attached to short-term mutual fund share trades.

The Basics of Mutual Funds

For many investors, the first step to understanding the process of trading mutual funds is to draw clear distinctions between mutual funds and exchange-traded funds, also referred to as ETFs. For many new investors, it is all too easy to mistake the characteristics of these exchange-traded funds with a mutual fund, which could lead to serious issues down the road.

First and foremost, it is important to realize that mutual funds are not actively traded on the open markets. When an investor chooses to purchase shares in a mutual fund, they must do so through the fund itself, or by soliciting the services of an authorized broker.

Depending upon the specific nature of the fund itself, certain investment rules may be imposed. For example, it is not uncommon for mutual fund owners to set a minimum investment baseline under which individuals are not allowed to purchase shares. These minimum investment amounts vary considerably, but are often within the realm of $1,000 to $10,000. With that in mind, one of the first questions that a new investor should ask themselves is whether or not they have access to the volume of capital they need to take their first step into the world of mutual fund investing.

Exploring Various Forms of Mutual Funds

When an investor buys shares in a mutual fund, they are essentially placing their money in the hands of a professional "caretaker" who oversees a variety of investments using this capital. As could be expected, the larger the number of shares an individual owns, the greater the payout on profitable investments. Likewise, a higher share stake in a mutual fund can also result in increased exposure to loss in the event that the performance of the fund declines.

When an investor makes the decision to place their funds into a mutual fund, they may try to choose a fund that focuses on particular investment vehicles that they have some previous knowledge of. For example, mutual funds can act like money market funds, bond funds, stock funds and target-date funds.

Money Market Mutual Funds

If a mutual fund specializes in money markets, they are regulated by U.S. law and can only invest in very specific, short-term assets that are issued by various domestic corporations and governmental agencies. The specific assets that are available as investments are closely regulated and considered to be very low risk. In exchange, the return on money market funds remains relatively low.

Assessing Bond Funds

Bond funds, on the other hand, seek to deliver higher returns to investors by exploring the multi-faceted nature of the bond market. This particular type of fund is subject to significantly fewer regulations than a money market fund. While risk levels are noticeably higher with bond funds, the potential for return is also greater.

However, so is the potential for loss. Investors who buy shares in bond funds can commonly expect to receive dividend payments throughout the year derived from the size of their current investment. This dividend payment includes any interest that may have accrued on the securities forming the backbone of the investment strategy.

Understanding Stock Funds

As could probably be anticipated based on the name, a stock fund focuses exclusively on investments in publicly traded corporate stocks. Therefore, an investor who places their funds into a stock fund can expect the performance of their mutual fund to reflect current trends occurring in the marketplace. Stock funds are further distinguished by the specific stocks they focus on. The primary formats of stock funds available today include growth funds, income funds, index funds and sector funds.

By far, growth funds represent the greater possible opportunity for gain out of the various picks included in stock funds. This is due to the fact that these stocks typically will not offer a regular dividend but, instead, actively demonstrate that they are capable of achieving higher year-end returns.

The most niche group of stock funds are labeled sector funds. A sector fund will focus exclusively on publicly traded stocks in a particular industry, be it aerospace, pharmaceuticals, constructions, etc. Sector funds are often managed by former industry professionals or fund managers with an extensive track record trading these particular types of stocks.

Diversification inside of a stock fund is possible and commonly occurs in what are referred to as target-date funds. These particular stock funds contain a hybridized mix of bonds, publicly traded stocks and a myriad of other investment platforms. The fund manager will shift the balance of assets inside of the fund depending upon current market conditions and perceived opportunities to capture higher growth rates. These funds derive their name from the fact that they are often used by individuals planning for retirement who have set a specific timeline for their exit from the fund.

Assessing Share Price

Yet another key difference between mutual funds and exchange-traded funds is the way in which these shares are purchased and valued. Whereas exchange-traded fund shares can be purchased throughout the day, mutual fund shares can only be purchased at the end of the current trading session. This does not mean to imply that an individual must call their broker at exactly the right moment when trading closes to purchase shares. Instead, orders for shares will only be filled at the close of the current trading session.

This regulation is due primarily to the fact that the value of a mutual funds share does not change during the trading day. Instead, shares are re-priced following the close of trading. The price of a mutual fund's share is directly based on its net asset value, or NAV. The NAV of a mutual fund is equivalent to the current worth of all market assets in the fund's portfolio.

After the market closes at the end of the trading day, mutual funds will release their NAV within a short window of time, typically no more than a few hours. At this point, investors will have an accurate understanding of the current value of the fund and, on a more fundamental level, what a share in this fund is actually "worth." Shares will only be officially transferred to an investor once NAV has been calculated at the day's end. If an investor desires, they can typically purchase fractional shares in a fund as well. This may be ideal for funds where share prices are quite high.

Buying and Selling Mutual Funds

Because a mutual fund is not traded on the open markets, an investor choosing to sell their shares will not be transferring them to another individual via a brokerage. Instead, shares are "redeemed" and sold back to the fund itself. According to U.S. law, investors have the right to sell the shares of their mutual fund back to the fund itself at any time. Once the share has been redeemed, it is typically incumbent upon the fund to reimburse the former shareholder within seven days, although exceptions to this rule can exist.

It is this requirement imposed on mutual funds to honor share redemption from shareholders which makes buying and selling shares within a 30-day window a somewhat controversial practice. The fund managers overseeing strategic planning for the fund are often relying on both short- and long-term tactical insight to inform their trades. When a single investor buys and sells a large sum of shares in a short period of time, the chances are good that no significant upheaval would occur. However, in the event that actions such as these were happening en masse, this could significantly undermine fund health and performance.

Although funds are required to redeem shares when requested by investors, this does not mean that they are prohibited from imposing fines based on specific redemption practices. With that in mind, many mutual fund managers will place early redemption fees on redemptions which occur within 30 days of the share purchase.

Working With Your Broker

Regardless of whether or not you are planning on redeeming your mutual fund shares within a 30-day period or planning on holding them for an extended timeframe, you will only be able to redeem them using the assistance of a brokerage or the fund itself. With that in mind, you should ensure that you know exactly how to take your shares back to the fund when you have determined that it is the appropriate time to sell.

Given the fact that most individuals buy and sell mutual fund shares through online brokerages, you can use this particular platform to redeem your shares as needed. This is arguably the fastest way to complete this process.

If you are new to the world of online brokerages, you should take the time to compare various options, as the per-trade fees for brokerages and the amenities they include can vary considerably. Additionally, some brokerage firms may implement a minimum investment outside of the thresholds imposed by the mutual fund itself. This information is absolutely critical if you are planning on converting mutual fund trading into a core element of your long-term portfolio.

Getting Additional Information

If you are ready to begin exploring more mutual fund options, you should make sure you know all of the trading mutual funds rules before you begin. With that in mind, it may be in your best interest to consult an investment professional or financial advisor before you begin investing in mutual funds. These individuals may be able to provide additional insight and shed light on important issues which you have yet to consider. Although these services may come with a fee, the expense is well worth the type of knowledge gained.